A federal judge has reopened Donald Trump’s $10bn case against the Internal Revenue Service (IRS), after receiving a third-party motion asserting that the settlement, which lacks detail, “is a product of collusion and is itself a fraud on the court”.
The ruling, issued by the Miami judge Kathleen Williams, revives a lawsuit brought by the president and his sons against the IRS after their personal and business tax returns were leaked by a former contractor.
Trump dropped the lawsuit last week and Todd Blanche, the acting attorney general who was formerly Trump’s personal defense lawyer, announced that, in exchange, the US was “forever barred” from auditing the tax returns of Trump family members. The justice department also unveiled a controversial $1.8bn fund to compensate people who claim they are victims of the federal government.
The “anti-weaponization” fund has been widely criticized, including by lawmakers, even some Republicans, who have termed it a “slush fund” and a political liability. Others have said it is effectively a scheme for the Trumps to reward political friends while indirectly benefiting the family.
The decision by Williams to reopen the case – itself an unusual move, given that civil plaintiffs have broad latitude to drop complaints – was returned after a bipartisan group of 35 former federal judges urged her to look more closely at the settlement.
“The purported ‘settlement’ that was publicly disclosed after this court dismissed this matter raises profound questions about the parties’ candor toward the court and manipulation of the judicial system, which threatens to undermine confidence in the administration of justice,” lawyers for the former judges wrote.
The judges contended that Trump had used his suit against the IRS to obtain “unlawful private benefits” for himself and his family, and to create a fund that would dole out taxpayer money “without constitutional or congressional authority”.
They also argued that the president had tried to shield the deal from judicial oversight by rushing a settlement and “short-circuiting” the court’s ability to review its terms.
Williams, an Obama appointee, had earlier questioned whether the lawsuit presented an actual conflict before her, given that Trump was effectively both plaintiff and defendant, since he controls the IRS, itself a branch of the treasury department.
In her order issued on Friday, Williams said that she wanted to investigate the circumstances surrounding the settlement and whom it benefited. An inquiry could ultimately see justice department officials, including the acting attorney general, brought before her court to testify.
Williams wrote that she was “empowered to investigate serious misconduct” in any case before her, and ordered attorneys for Trump to inform her by 12 June how they respond to “the charges of collusion and whether the parties are truly adverse” and “the question of whether the case should be reopened because the court was the ‘victim of a fraud’”.
The judge also asked attorneys to answer if Trump had colluded with his own government to settle the case “to avoid judicial scrutiny”.
In her order, Williams also questioned the “forever” deal shielding the Trumps from IRS scrutiny. The judge noted that only Blanche signed the provision.
Attorneys for the retired judges who filed the motion said in a statement they “greatly appreciate the seriousness with which the court is addressing these grievous allegations”.
Charles Littlejohn, a former employee of IRS consultant Booz Allen Hamilton, was sentenced to five years in prison in 2024 after being convicted of leaking taxpayers’ data, including the Trumps. The leak revealed that Trump paid little or no income tax over several years after paying millions on earnings from his reality TV show The Apprentice.
Controversy has swirled around the $1.8bn “anti-weaponization” fund that many fear will benefit only claimants who seek financial restitution on claims they were targeted by prosecutions during the Biden administration, such as Trump supporters who were convicted by juries of beating police officers defending the US Capitol on 6 January 2021. But the fund is not overtly limited by political persuasion.
Former Trump attorney Michael Cohen, now a critic of his former boss, has said he will apply, saying he suffered “identical” financial and personal persecution to those who prompted the creation of the fund.
The fund is facing separate challenges, including a temporary block on its establishment and any disbursements issued by a federal judge in the eastern district of Virginia.
